Last week, Gov. Mitch Daniels authorized “efficiency dividend payments” of up to $1000 to state employees who helped Indiana come out of the last fiscal year with a budget surplus of $1.2 billion. The surplus is a result of higher than expected revenues and large spending cuts by state agencies.

The sum of an employee’s efficiency dividend payment depends on his/her performance. An employee who “meets expectations” will get $500, those who “exceed expectations” will receive $750 and “outstanding workers” will see an extra $1,000 in their August paychecks.  Daniels said about 90 percent of the 24,000 executive branch employees will receive a bonus. Overall, the payments will add up to approximately $20 million.

Despite these one-time payments, Gov. Daniels insinuated that there would be no new permanent increases in wages or salaries, despite three years without raises for state employees. He cautioned that the Indiana budget may be doing well this fiscal year, but spending prudence is necessary in these uncertain economic times.

Even though the state is out of the red this fiscal year, Indianapolis should exercise restraint to prepare for possible fallout from the uncertainty of the federal debt ceiling agreement deadline approaching. If an agreement is not met, federal funds may be siphoned off and result in unforeseen state spending, quickly depleting the state’s surplus.

 

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